Stanchart goes against odds to post Sh3b profit jump

Standard Chartered Bank Chief Executive Lamin Manjang.

Standard Chartered (Stanchart) Bank’s net profit has risen 45 per cent from Sh6.3 billion to Sh9 billion for the year ended December 2016.

This was on the back of increased lending to the Government and lower cost of covering for bad loans.

Income from loans to the Government went up by Sh3.1 billion to push the group’s earnings from credit to the State to Sh10 billion.

Stanchart is now holding a total of Sh86 billion of Government and other securities in its asset books, up from Sh72 billion a year ago.

The focus on lending to the Government, however, meant that loans to customers rose at a slower rate from Sh115 billion to Sh122 billion.

“The performance in 2016 was strong, reflecting the good progress we have made on the strategic actions we set out in late 2015. We continue rebuilding the balance sheet with good quality assets and our capital position remains strong,” said Chief Executive Officer Lamin Manjang.

The results are a massive turnaround after the lender posted a 39 per cent decline in profit for the full year ending 2015 due to Non-Performing Loans (NPLs).

In that year, operating expenses hit Sh16.2 billion, up from Sh11.7 billion mainly due to a Sh4.9 billion loan-loss provision, a 277 per cent increase compared to 2014’s provision of Sh1.3 billion.

The bank seems to have addressed the issues with its defaulting borrowers, which allowed it to halve its provisions for bad loans.

This year, loan loss provisions - expenses set aside as an allowance for uncollected loans and loan payments - stood at Sh2.1 billion while the total stock of bad debts only grew by Sh400 million.

This was a massive difference from the industry, which has seen gross bad loans rise to Sh214 billion by November last year, the biggest growth in stock of bad debt in the country.

The NPLs have jumped by Sh100 billion since January 2015, according to the latest CBK’s monthly data.

Stanchart sai loan impairment is down 55 per cent year-on-year due to the benefit of past risk management actions and the its tightened risk tolerances. “We made substantial changes in the business to address the underlying challenges that impacted our earnings in 2015, including increased investment in digital technology had enabled the bank to control costs, manage risk and exploit new business opportunities,” said Mr Manjang.

The bank also attracted more deposits last year as Kenyans looked for “safe” lenders when the industry witnessed the collapse of three mid-tier banks.

Stanchart’s deposits went up from Sh172 billion to Sh186 billion.